Investors interested in Retail - Restaurants stocks are likely familiar with BJ's Restaurants (BJRI) and Chipotle Mexican Grill (CMG). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, BJ's Restaurants is sporting a Zacks Rank of #2 (Buy), while Chipotle Mexican Grill has a Zacks Rank of #3 (Hold). This means that BJRI's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BJRI currently has a forward P/E ratio of 19.64, while CMG has a forward P/E of 33.52. We also note that BJRI has a PEG ratio of 1.40. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CMG currently has a PEG ratio of 2.77.
Another notable valuation metric for BJRI is its P/B ratio of 2.77. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CMG has a P/B of 18.65.
These metrics, and several others, help BJRI earn a Value grade of A, while CMG has been given a Value grade of D.
BJRI sticks out from CMG in both our Zacks Rank and Style Scores models, so value investors will likely feel that BJRI is the better option right now.
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BJ's Restaurants, Inc. (BJRI): Free Stock Analysis Report Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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